Compare Car Loan Refinancing Rates
If you are looking to refinance a car loan, then there are many great options available to you on the market today. These range from direct lenders to marketplaces where you can compare a variety of different options at the same time. This guide will walk you through the whole process of refinancing a car loan from start to finish.
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Getting Started
As soon as you have decided to explore the possibility of refinancing your car loan, there are a few things that you should become familiar with. This will allow you to bet the best deal possible. Generally, there will be three different ways to get a refinancing car loan. This will be through the likes of a bank, credit union, or an online lender.
The reason why people look to refinance their car loans is that they might be in a situation whereby they are paying a very high-interest rate. There may be the option to significantly decrease the rate of interest you are paying on the loan if you go down the refinancing route.
Many people are now exploring this option, particularly as online lenders make it so quick and easy. You no longer have to go through a drawn-out process of visiting physical banks and taking time out of your day to do so. Instead, everything can be done with a few clicks of the keyboard. There are a few distinct steps that are associated with finding the best car loan refinancing rates. Here is an insight as to some of the key steps that you will encounter along the way:
Selecting a Car Loan Refinancing Lender
You are going to initially need to figure out where you are going to get the car loan refinancing from. There will usually be banks, credit unions, and online lenders who will offer these types of packages.
Some lenders specialize in refinancing, while others offer it in addition to original loans. You can often find more flexible rates online, as well as often getting access to the funds on a quicker basis. Some people prefer to go with the likes of banks as they are legit and trustworthy.
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Getting Pre-Qualified
You will likely want to see just exactly how much you can get for a refinancing loan, as well as the rate of interest that you will pay. Therefore, you can take part in the pre-qualification process. This step is very simple with online lenders as you just fill out some key information and you will be shown what you can expect to get when refinancing. There will usually be no hard credit check at this stage and you will need to supply some key personal information.
Shopping Around
Assessing the different options on the market will be a good way for you to gauge the average refinancing rates that are on offer. You will want to compare the rates and overall refinancing options that are being offered to you. This gives you a good idea as to what the market looks like.
Read the Fine Print
Some lenders will promise a huge amount of things to borrowers. However, there are certain situations when everything appears to be rosy on the surface, but this is not actually the case when you go a bit deeper. If something appears to be too good to be true, then it often is. This is why checking out the fine print of an offer is important before you commit to anything.
After Applying
As soon as you have submitted an application to a lender there will usually be. Hard credit check performed. This is to make sure that you will be able to pay back what you owe. Certain lenders will let you know if your application was successful within 24 hours, while others might take up to a week to inform you.
Important Terms to Be Aware of:
Prepayment Penalties: If you are looking at refinancing your car loan, there will sometimes be a prepayment penalty in place that you will need to pay if you want to proceed with paying off your original loan earlier than planned originally.
Origination Fee: Some lenders will charge an origination fee when issuing a new refinancing loan. This will usually be deducted from the money that you are credited after taking out the refinancing loan.
APR: The Annual Percentage Rate (APR) is the way in which you can objectively compare the rates that are on the market. This figure will take into account the fees that are associated with refinancing a car loan, making it a good measure of objectivity.
Late Fees: These are the charges that you will need to pay in the event that you are late with making repayments on your refinancing obligations.
Things Necessary to Begin
If you are looking to proceed with refinancing your car loan, then there are going to be different types of things that need to be done. This allows you to prepare as best as you possibly can.
Credit Score
Having a good credit score is going to make the entire refinancing process a lot easier than it otherwise might be. The lender will look at your credit score to see what your track record is like when it comes to meeting repayments on time for others types of debt you have had over the years. The credit score that you have can dictate how much you are going to be able to borrow, as well as the rate that you are going to pay on these borrowings.
Loan Purpose and Amount
When refinancing, the purpose of the loan is going to be obvious. You want to get a better situation for your car loan than it currently is in. You will also need to figure out exactly how much you are looking to borrow as part of the refinancing process.
Repayment Terms
There are going to be different term lengths on offer. Naturally, the shorter-term lengths mean that your regular repayments are going to be bigger than if you spread them over a longer time horizon. However, you will pay less interest the quicker that you pay off the loan.
Documents and Details
It is a good idea to make sure that you have all of the necessary information and documentation in order before you begin the application process. This makes everything a lot more efficient as you will need to verify your information with the corresponding documentation.
Things to Know
If you are looking to get started with the car loan refinancing process, then there might be a few different terms that you will come across that are not very common. Here are some terms that you should be aware of when it comes to committing to refinancing:
Secured Loan: A secured loan is when you are going to put an asset on the loan as a form of collateral. In the case of a car loan, this could mean putting your car up as collateral. An unsecured loan is going to be one where no collateral is needed.
Fixed-Rate: A fixed rate means that you will be paying interest at the same rate through the entire lifetime of the loan. A variable-rate means that the rate of interest can change over time, depending on the current market climate.
Co-Signer: Some lenders will allow you to get a co-signer on board with your refinancing. This will allow you to get better terms if the co-signer has good credit and income levels.
Direct Lender: A direct lender is one that will provide the refinancing loan directly to you.
Marketplace Lender: A marketplace lender is when you will get access to quotes from numerous individual lenders at the same time, making it a more efficient comparison process.
Comparing the Different Refinancing Options
As you have a good idea now as to what is involved with refinancing a car loan, you might be able to proceed to the next step of the process. This sees you checking out the different lenders and ultimately choosing one to go with. You are going to check to see what the APRs are with the different offerings, as well as making sure that you can afford the monthly repayments, and that everything else checks out.
APRs are going to be your friend in this regard. You should also check to see that the lender is a reputable one. This can be done by using useful resources such as the Better Business Bureau website in order to see what real people experienced when they refinanced their car loans.
Online Refinancing Lenders vs Traditional Refinancing Lenders
There is one major decision that most people need to make when it comes to committing to refinancing their car loan. This is the decision to choose between going with an online lender or deciding to go with a more traditional lender. Each of these options has its own pros and cons that you will need to consider. Here is a quick breakdown of the redeeming qualities of both options, as well as some of the inhibiting variables:
Traditional Lenders – Pros
- Secure and safe option
- In-person banking is usually an option
- Existing customers of the bank can get more money or better rates
Traditional Lenders – Cons
- Qualifications can be stricter
- Often more limits on terms and rates
- Slower application and approval process
Online Lenders – Pros
- Application and approval process is quick and easy
- Can pre-qualify
- Easy to compare the different options
- Not as strict qualification
- Wide variety of loan types
Online Lenders – Cons
- Not every lender is reputable
- In-person discussions not always possible
- Might be more preferable terms if an existing bank member
Conclusion
Refinancing a car loan can be a very effective way to decrease your monthly obligations by getting a more favorable interest rate. This can allow you to spend money on other obligations each month. The process of refinancing a car loan has never been easier thanks to the abundance of online lenders. Therefore, getting started refinancing a car loan can be a great option for many people in the United States today.
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